Thursday, September 25, 2008


"When a man is tired of London, he is tired of life."

-Samuel Johnson

Macro Man is tired of London. Frankly, he was tired of Madrid. And he's also tired of his little enclave in Surrey to which he retires each evening and weekend.

Have no fears, gentle readers. Your scribe is not perched on the ledge of a tall building, prepared to commit a gruesome kind of hari-kiri (for one thing, he is acrophobic.) He is far from tired of life. He is, however, tired of these markets, which seem to require 24-hour attention, seven days a week.

Perhaps it is the dark mornings; without sunshine and birdsong streaming through his window, Macro Man is naturally a bit groggier when the alarm goes off. However, his fatigue is more of an existential ennui; how many crises, miracle cures, and Sunday nights on the Bloomberg can one man take before the brain starts Operation Shutdown?

Not that he's begging for mercy, of course; attention to detail in stressful times is part of the job description. And stress remains highly evident in this market. The LIBOR/ICAP rates both surged higher yesterday; below is yesterday's chart updated with the latest fixes. Observe how ICAP 3 month rates are nearly 4% now!

The same sort of stress is evident further out the curve as well; 2 year swap spreads reached another record high yesterday, and are on another planet compared to any levels in Bloomberg's 20 year dataset. That Banesto is now giving away free motor vehicles with every large time deposit would appear to confirm Macro Man's suspicions that all is not quite right with European banks; one wonders what Miguel Indurain thought of the idea?
With markets moving as quickly as they are, traders (or at least Macro Man) feel like they must keep a closer eye than usual on both price action and their P/Ls. Of course, the downside to doing so is an all-to-frequent negative message resulting from downswings in the P/L. This month, for example, Macro Man has had twelve losing days and seven winning days. While he has managed to scrounge together a profitable month (knock on wood), thanks to the optionality in his book, it is still psychologically tiring to go home starting at a red number nearly twice as often as a black one.

By his count, he's only had two sleepless nights this month; he can only imagine how exhausted, mentally and physically, less fortunate market punters must feel. Readership figures also suggests that you, too, are feeling the strain. After surging last week, weekday visitor figures have retreated this week to more "normal" levels.
Sod's law suggests that the SCREW-U package will be voted on Saturday or Sunday, thereby depriving punters of yet another relaxing weekend. However, with quarter end rapidly approaching and the market evidently as fatigued as Macro Man, perhaps the surprising outcome of the next week would be that everything goes gentle into that good night.


Charles Butler said...

Speaks worse, if possible, about car sales than banks. The same offer's being made to purchasers of new homes in certain places.

Macro Trading Ideas said...

Yes that's the ugly reality today..
we all are tired, we have a 22/6 work week, markets are crazy, libor/ois is at 6 sigma level!!!
on cash markets you don't trade anymore, price showed are all worthless. Spreads are at levels never seen, and I know a lot of people that are crying..
What i'm seeing, and that really worry me, is that people are moving away from money markets fund if they see something that isn't core govt bonds in their portfolio.
My girlfriend works in banesto in spain, now her daily work is to call late-payers at home and to sell perpetual tier1 banesto bond as sure investment! what an ugly bank...

i suggest a traders' relax week to the Red sea, blackberry avoided! any care?
And in the meantime, just to relax: GE profit warning!

Anonymous said...

one wonders what Miguel Indurain thought of the idea?

Ah Big Mig, he's a living legend....pure class.

Armstrong would never have won 7 Tours if Miguel was in the peloton and still in his prime.


Anonymous said...

Stay strong buddy. As above stated everyone is exhausted by the crazy as it sounds I wouldn't be surprised to see a post 9/11-type explosive upside rally...

if only because everyone is so exhausted and crashing from adrenaline overload that every single seller's/short-seller's negative views have been incorporated into the market.

cordura21 said...

Hey guys. Can you give me a hand on how to get the ICap rates on the Bloomberg? TIA. (BTW: I remember when spanish banks started giving away scales with accounts. First time the software looked for amount instead of number of accounts opened, so in the first run a guy with a large deposit earned enough scale to fill his swimming pool)

Anonymous said...

ICAP 3mo NYFR is NYFR3M Index

Anonymous said...

completely agree, normally markets this unstable and volatile only last for a couple of weeks at most, this has been going on for almost 2mths now and is exhausting

Anonymous said...

Are the ICAP/NYFR rates only available via BBG or are there somewhere free to download (like libor)?

Anonymous said...

These headlines were, for a while, next to each other on

•Stocks in U.S. Advance on Speculation Lawmakers Will Agree on Rescue Plan

•Money-Market Rates Rise on Concern $700 Billion U.S. Bailout to Be Diluted

Can the disconnect between equity and credit market sentiment be clearer? Which one is going to cave?

Macro Man said...

I swear, this week it's felt like down 10 bps on the day is better than up 10 bps during normal markets.

Anonymous said...

Good point anon at 3.13. It seems the theme of this now 15 month old "credit crunch" has been equity lagging credit. I don't think the brief post-bailout ratification bear market rally will be any different. In reality I guess this new pheno could just be the fact that credit markets are a lot more developed in this downturn than in any previous downturn -- more participants = more info = less imperfect markets

D said...'re killing me here buddy! Why don't you move the trading bunker to somewhere sunny for a month or two?? Otherwise, it is completely advisable to step back until the malaise passes.

fyi, my quant's work suggests equity rally into the new year.


Macro Man said...

D, my Sharpe ratio while physically present in Spain is, without joking, probably about 5.

Sadly, I have a few things in my book at the moment that are long-term bottom of the drawer things that are sellable..but I really would rather not cross the bid/ask.

I have run the VaR right down...and yet the slow bleed just continues and continues, thanks to a whole host of reasons that seem to shift on a virtually hourly basis.

D said...

well a legitimate 5 is nothing to complain about...

you're not using the t-bill for r(t) are you?!

haha, j/k

Macro Trading Ideas said...

MM, are you resembling a CDO square risk profile???
just to translate you're doing a 18% return with a yearly standard deviation of 3% (18-3/3), so a daily 0,2% standard deviation?? I'll short you, (macro)wonder-man! ahhaha
So what's your problem, close everything and go home until next year!
It seems that your doing a Level3 accounting..
I'm happy until now with a lot less (4+%), but at least now i'm enjoing my priceless short german bonds!
My compliments!

Quarrel said...

Anon @ 3:13-

Bloomberg not only have terminals, they're moving with the times, and have a website too!

See here - NYFR3M

ok, the sarcasm is unwarranted, but MM isn't the only one feeling the pinch. Of course, he does have to travel to Surrey, so some of it is self-induced.


Anonymous said...

Thanks, quarrel

mikarsky said...

Anon 3:13

The headlines just show how clueless journalists are when forced to speculate about speculations. Throwing a coin gives you as much information..

Macro Man said...

D, MTI: in fairness, there are only about ten days in the sample set: The first week and a half on August (when I made 2/3 of my annual budget thanks to yen crosses) and last Friday/Monday, when somewhat startlingly I had one of my best two-day stretches of the year.

dblwyo said...

Y'all may be interested in this or may already be aware of it (if you've got a WSJ sub):
"After being attacked by politicians and the popular press in the past two weeks, the City has a new critic: the Church of England.

The Archbishop of York, John Sentamu, took the fight to the heart of the City in a speech to a group of bankers Wednesday evening. He labeled funds that sold short the shares of British bank HBOS "bank robbers" and "asset-strippers." The sharp decline in HBOS shares ahead of its sale to Lloyds TSB Group has been blamed by some on short-selling. This, in part, led the U.K. markets regulator, the Financial Services Authority, to temporarily ban short-selling last week."

Watch out for peasants with torches and pitchforks.

Anonymous said...

i've been fascinated by google trends since its release....for you contrarians out there...

time to buy friday morning's gap down?

mikarsky said...

Great comment! How reassuring if the clergy feels a higher call to save the banks! But they burned naysayers before so be ALERT!

The ban seems more like witchhunting and should go to the constitutional court. The German BaFin is only generally allowed to "eliminate or prevent a misfunctioning situation". Some banks played and lost their most important asset: trust. So WHAT is misfunctioning if they go bankrupt??

Luigi "spec" Vigilante said...

dear all,
i still dont get how can u say these mkt's r tiring ... mkt's have always been the same, that is a continuous exchange of perceptions.
now, i used to be a so-called position trader, and when the sub-prime crisis started i was getting uncomfortable running my positions for weeks, cuz vol was dragging out of me a lot of mental capital. so what i did? i simply changed style gradually and guess what? i became a what i never wanted to be and i always snobbed, that is a scalper. this month my average duration of 95% of my round-trips has been less than 10 seconds. i used to spend 18 hours per day watching markets and i developed the "miss" feeling syndrome, but paradoxically current markets have let me to afford to wake up anytime of day, watch the price action for a couple of hours and put on profitable lighting-fast trades of amateurish size for another hour. now, many people may say: its peanuts, we r big boys here, we r masters of the universe, we wanna make big chops, we r the ultimate predictors of the economy future!!!, ... but guess what? im now less physically stressed than in the past. as soon as mkts will go back to normality i will trade size again and i will be a big boy again. but for the mom mkts r telling me that capital preservation is more important than my ego and no way i will let my mental capital and health to go on tilt.
thanx all and in particular macroman for his excellent blog.

Macro Man said...

LV, if you can successfully spec this market on a micro-term level, I salute you. Throughout my career, my day-trading results have been uninspiring to say the least, and in many ways I find it to be at least as hard work as the current market...though at least it carries the benefit of Sunday remaining in the weekend.

So while I wish I could join you, I just cannot...which leaves me as tired as I was....

Angela Victor said...

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